He also replied to Southern-based criticism of the decision, saying it was not about the South, North or West Coast.

Earlier, Denison independent MHR Andrew Wilkie called the decision ludicrous as it could compromise operation of the state's biggest hospital, the Royal Hobart Hospital.

His comments were amplified by Hobart-based Greens health spokeswoman Cassy O'Connor, who backed the merger, but said the move to Launceston would be ``a serious mistake that smacks of parochial politics interfering in good health governance reform''.

Mr Nikolic was firm in supporting the Launceston move.

``Mr Wilkie should reflect on the fact we are a state of 500,000 people and one health system, and it is time we come together,'' he said.

``We need to have a team approach rather than that sort of language and it is inappropriate to be arguing against parochialism by making parochial comments.

``Launceston happens to be halfway between the North-West and the South and it is clearly intended for the THS to service the whole state and in that respect it makes sense.''

Australian Medical Association state president Tim Greenaway endorsed strengthening the Clinical Advisory Group and said it was too early to determine what the THS structure in Launceston would look like.

He said the AMA was mindful of concerns but was keen to work with the state government to achieve the best outcomes.

``We have got a real issue in Tasmania because of the effect the federal government cuts will have on Tasmania and our capacity to deliver effective healthcare,'' Dr Greenaway said.

Opposition Leader Bryan Green was yesterday critical of the decision.

``What I do understand is that this is the first and the start of effective cuts to the health system in Tasmania as a result, not only of their mismanagement of their election promises leading up to the state election and beyond, but also the pressure that's coming on as a result of the federal budget,'' Mr Green said.

``That will mean savage cuts to the Tasmanian health system.

``Centralised health systems have not provided good health opportunities and services for the regions of Tasmania, that's why they were put there in the first place.''

Mr Ferguson, who is based in Launceston, said being based in the North would deliver a balanced distribution of health bureaucracy between the North and South with the Department of Health and Human Services based in Hobart.

He said the change would make waiting lists more efficient, deliver better patient services and save $21 million over four years - with no impact on hospitals.

The reforms will include:

--The formation of a sole statewide organisation.

--A corresponding review and reform of the department.

--Convening a new Health Council of Tasmania.

-- Developing a white paper to set the government's agenda for better service planning, profiling and delivery.

--A green paper will be released for public consultation by the end of the year, with the white paper to be released by March 31 next year.

Launceston Mayor Albert van Zetten and Launceston Chamber of Commerce executive officer Maree Tetlow said they hoped the decision would mean more jobs for the North.